Bluegreen Vacations Corporation Reports Second Quarter 2020 Results

BOCA RATON, Fla.–(BUSINESS WIRE)–Bluegreen Vacations Corporation (NYSE: BXG) (“Bluegreen” or the “Company”) today reported its second quarter 2020 financial results.

2Q20 Highlights:

  • Net loss attributable to shareholders was $(8.8 million) in the second quarter compared to $(11.2 million) in the prior year quarter.
  • Loss Per Share (“EPS”) of $(0.12), compared to $(0.15) in the prior year quarter.
  • Adjusted EBITDA decreased to a loss of ($4.1) million, compared to Adjusted EBITDA of $28.7 million in the prior year quarter.
  • Total revenue decreased 64% to $68.8 million from $192.2 million in the prior year quarter.
  • System-wide Sales of vacation ownership interests (“VOIs”) decreased to $13.1 million in the current year quarter from $163.6 million in the prior year quarter.
  • The current year quarter’s results were adversely effected by the economic impact of the COVID-19 pandemic and the steps taken by the Company in connection with the impact of the pandemic which included the temporary closure of all of the Company’s VOI sales centers in the last week of March 2020. As of June 30, 2020, 21 of the Company’s 26 VOI sales centers had reopened for sales to existing owners and one was selling to new prospects. While most resorts had previously been closed, at June 30, 2020, 67 out of 68 resorts had reopened and occupancy for June was approximately 60% at all resorts and 58% at resorts with on-site sales centers.
  • Included in the results for the quarter ended June 30, 2019 are expenses related to the Company’s settlement with Bass Pro Shops of $39.1 million, or $0.39 per share.

Alan B. Levan, Chairman, President and Chief Executive Officer, commented, “Our sales operations were closed during most of the second quarter in response to the COVID-19 pandemic, but steps taken during March to mitigate our losses resulted in a 63% reduction in normalized Selling, General and Administrative expenses, while having minimal sales revenue. In addition, our resort management business and finance operations continued to generate revenues during this period. We were also able to maintain liquidity of over $209 million of unrestricted cash on our balance sheet as of June 30, 2020, while at the same time reducing our outstanding debt by over 9%. We are pleased that we have reopened our resorts to owners and guests and have recommenced many of our sales and marketing operations around the country. As of July 31, 2020, the reopenings put us in a position to bring back 2,900 of our associates who were either furloughed, severed or on reduced work hours to a full-time basis. However, this continues to be an unprecedented event in the United States and globally, and it is currently impossible to predict the duration or severity of the pandemic or if and when the economy and our business will return to pre-pandemic levels. But we believe that we are executing a prudent plan of action in response to the current circumstances and will seek to continue taking appropriate actions as conditions develop in the future.”

Financial Results

(dollars in millions, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

$

68.8

 

$

192.2

 

(64.2)

%

 

$

225.8

 

$

357.9

 

(36.9)

%

(Loss) Income before non-controlling

interest and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(benefit) provision for income taxes

$

(12.0)

 

$

(10.0)

 

(20.0)

%

 

$

(11.0)

 

$

12.2

 

(190.7)

%

Net (loss) income attributable to

shareholders

$

(8.8)

 

$

(11.2)

 

21.0

%

 

$

(8.6)

 

$

4.0

 

(317.4)

%

(Loss) earnings per share basic and

diluted

$

(0.12)

 

$

(0.15)

 

20.0

%

 

$

(0.12)

 

$

0.05

 

(340.0)

%

Adjusted EBITDA

$

(4.1)

 

$

28.7

 

(114.3)

%

 

$

6.9

 

$

54.9

 

(87.4)

%

Capital-light revenue(1) as a percentage of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

total revenue

 

66.7%

 

 

64.5%

 

220

bp

 

 

68.6%

 

 

66.8%

 

180

bp

 (1)

Bluegreen’s “capital-light” revenue includes revenue from sales of VOIs under fee-based sales and marketing arrangements, just-in-time inventory acquisition arrangements, and secondary market arrangements, as well as other fee-based services revenue and cost reimbursements revenue.

Total revenue for the three months ended June 30, 2020 decreased 64% to $68.8 million from $192.2 million in the prior year quarter, primarily associated with: i) the decrease in Sales of VOIs, Fee-Based Sales Commission revenue and Title revenue associated with the effects of and the Company’s responses to the COVID-19 pandemic and ii) a decrease in Resort Operations and Club Management revenue, due primarily to a reduction in cost reimbursement revenue (which had no impact on Adjusted EBITDA) and a reduction in revenues from our Traveler Plus program, retail operations and lower third-party rental commissions as a result of the COVID-19 pandemic as discussed more fully under “Segment Results” below. Adjusted EBITDA decreased to a loss of ($4.1 million) in the second quarter of 2020 from $28.7 million in the second quarter of 2019, primarily associated with the economic impacts of the COVID-19 pandemic discussed above.

Segment Results

 

Sales of VOIs and Financing Segment

(dollars in millions, except per guest and per transaction amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System-wide sales of VOIs

$

13.1

 

$

163.6

 

(92.0)

%

 

$

150.5

 

$

293.3

 

(48.7)

%

Segment adjusted EBITDA

$

(15.3)

 

$

35.3

 

(143.4)

%

 

$

(2.9)

 

$

65.6

 

(104.5)

%

Guest tours

 

6,089

 

 

65,167

 

(90.7)

%

 

 

46,754

 

 

113,305

 

(58.7)

%

Average sales price per transaction

$

15,367

 

$

15,432

 

(0.4)

%

 

$

15,829

 

$

15,591

 

1.5

%

Sale to tour conversion ratio

 

13.8%

 

 

16.4%

 

(260)

bp

 

 

20.4%

 

 

16.7%

 

370

bp

Sales volume per guest (“VPG”)

$

2,122

 

$

2,528

 

(16.1)

%

 

$

3,225

 

$

2,603

 

23.9

%

Selling and marketing expenses, as a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% of system-wide sales of VOIs

 

204.9%

 

 

51.3%

 

15,360

bp

 

 

67.8%

 

 

51.1%

 

1,670

bp

Provision for loan losses

 

16.9%

 

 

14.9%

 

200

bp

 

 

37.3%

 

 

16.1%

 

2,120

bp

Cost of VOIs sold

 

11.5%

 

 

15.5%

 

(400)

bp

 

 

9.5%

 

 

12.0%

 

(250)

bp

System-wide sales of VOIs

System-wide sales of VOIs were $13.1 million and $163.6 million during the three months ended June 30, 2020 and 2019, respectively. As discussed above, all of the Company’s VOI sales centers were temporarily closed on March 23, 2020 and remained closed until June 2020, when 21 of the Company’s 26 VOI sales centers were re-opened for sales to existing owners with one of these sales centers also selling to new prospects.

As a result, the sales mix for the second quarter of 2020 was heavily weighted toward sales to existing owners at 86% of system-wide sales of VOIs, compared to 53% in the comparable prior year quarter.

Fee-based sales commission revenue

Fee-based sales commission revenue was $1.1 million during the current year quarter, compared to $55.3 million in the prior year quarter. This decrease was primarily a result of the Company’s temporary closure of its VOI sales centers in response to the COVID-19 pandemic, as discussed above, in addition to the fee-based sales commission as a percentage of third-party VOI sales decreasing to 52% from 66% in the prior year quarter. The decrease in the fee-based sales commission percentage was due to higher reserves for cancellations coupled with a period of fewer fee-based VOI sales.

Cost of VOIs sold

In the second quarter of 2020, cost of VOIs sold represented 11% of sales of VOIs compared to 15% in the second quarter of 2019. Cost of VOIs sold as a percentage of sales of VOIs varies between periods based on the relative costs of the specific VOIs sold in each period and the size of the point packages of the VOIs sold. The cost of VOIs sold as a percentage of sales of VOIs decreased during the three months ended June 30, 2020, as compared to the comparable prior year period, primarily due to the impact of lower cost secondary market purchases. Cost of VOIs sold is expected to range from 12% to 14% for the remainder of 2020.

Provision for Loan Losses

The provision for loan losses varies based on the amount of financed, non fee-based sales during the period and changes in our estimates of future notes receivable performance for existing and newly originated loans. The provision for loan losses as a percentage of gross sales of VOIs was 17% during the current year quarter compared to 15% during the prior year quarter. The increase in the provision for loan losses as a percentage of gross sales represents our current expected losses on VOI notes receivable generated during the period, and higher attorney related default activity.

In the first quarter of 2020, the Company had recorded an additional allowance for loan losses of $12.0 million, which included its estimate of customer defaults as a result of the COVID–19 pandemic. The Company is working with its owners who need assistance with mortgages on a case-by-case basis with a view to mitigating defaults, however there is no assurance that these efforts will be successful or that the allowances for loan losses taken to date will prove to be adequate.

Net Carrying Cost of Inventory

Net carrying cost of inventory increased $5.6 million in the second quarter of 2020 compared to the second quarter of 2019, primarily due to decreased rentals of developer inventory and decreased sampler stays due to government ordered travel restrictions and temporary resort closures in accordance with government mandates and advisories associated with the COVID-19 pandemic and increased maintenance fees associated with our increase in VOI inventory.

Selling and Marketing Expense

Selling and marketing expense increased to 205% of system-wide sales of VOIs during the current year quarter as compared to 51% during the prior year quarter primarily attributable to fixed costs inherent in the Company’s sales and marketing operations and the costs of maintaining certain sales and marketing associates on furlough despite the temporary closure of the Company’s sales and marketing operations during April and May 2020. In addition, during June 2020 the Company incurred costs associated with the reopening of kiosks at 64 Bass Pro and Cabela’s store locations. We utilize these kiosks to sell mini-vacation packages to customers for future travel which require the customers to attend a timeshare presentation.

General and Administrative Expense

General and Administrative Expense related to the Company’s sales and marketing operations decreased $40.9 million, as the second quarter of 2019 included $39.1 million of expenses related to the Company’s settlement with Bass Pro Shops partially offset by costs attributable to maintaining certain sales associates on furlough during the second quarter of 2020.

General and Administrative Expense related to corporate overhead and other decreased 51% to $9.1 million from $18.5 million in the second quarter of 2019. This decrease is primarily due to $6.9 million in employee retention credits earned in June 2020 due to the CARES Act, $2.2 million of which was earned on severance, and reduced payroll due to staff reductions and furloughs.

Resort Operations and Club Management Segment

(dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Resort operations and club management revenue

$

36.9

 

$

41.7

 

(11.4)

%

 

$

82.6

 

$

85.6

 

(3.4)

%

Segment adjusted EBITDA

$

18.5

 

$

15.4

 

20.1

%

 

$

34.0

 

$

29.5

 

15.5

%

Resorts managed

 

49

 

 

49

 

%

 

 

49

 

 

49

 

%

In the second quarter of 2020, resort operations and management club revenue decreased by $4.8 million, or 11%, to $36.9 million from $41.7 million in the prior year quarter, due to a decrease in cost reimbursement revenue, which has no impact on Adjusted EBITDA. Net of cost reimbursement revenue, resort operations and club management revenues decreased 9% as a result of decreases in revenues from our Traveler Plus program, retail operations and third-party rental commissions as a result of the COVID-19 pandemic. However, segment adjusted EBITDA grew by 20% to $18.5 million, driven primarily by lower costs incurred during the second quarter of 2020 due to cost mitigation activities implemented in the first quarter of 2020 and lower costs associated with the Traveler Plus program as a result of the COVID-19 pandemic.

Balance Sheet and Liquidity

As of June 30, 2020, unrestricted cash and cash equivalents totaled $209.4 million. The Company had availability of approximately $158.5 million under its receivable-backed purchase and credit facilities, and corporate credit line as of June 30, 2020, subject to eligible collateral and the terms of the facilities, as applicable. Excluding receivable-backed notes payable, the Company’s net debt-to-EBITDA ratio as of June 30, 2020 was 0.61.

In June 2020, the Company repaid $40.0 million under its syndicated corporate line of credit and amended the agreements to modify the definition of certain customary covenants. As of June 30, 2020, availability under the syndicated corporate line of credit was $55.0 million.

Also, in June 2020, the Company amended its revolving timeshare receivables hypothecation facility with Liberty Bank. The restructured revolving credit period will now expire in June 2021 and the maturity of the facility has been extended to June 2024. The amendment reduced the maximum permitted outstanding borrowings from $50 million to $40 million. As of June 30, 2020, $21.7 million was outstanding under the facility. In addition, the advance rate on the facility will decrease from 85% for qualified conforming receivables, as defined in the facility, to 80% by September 2020. Further, commencing on July 1, 2020, the interest rate on the facility was decreased from the Prime Rate with a floor of 4.00% to the Prime Rate minus 0.10%, with a floor of 3.40%. In addition, subject to certain exceptions, the Company’s recourse liability under the amended facility was reduced to $10 million. The facility was previously fully recourse to the Company. The Company plans to continue to use the facility to finance VOI notes receivable.

Free cash flow, which the Company defines as cash flow from operating activities, less capital expenditures, was $4.5 million for the six months ended June 30, 2020, compared to $(2.9) million for the six months ended June 30, 2019. The increase in free cash flow is primarily due to a decrease in the settlement payments made to Bass Pro pursuant to the agreement entered into in June 2019. The Company paid Bass Pro a $20.0 million initial settlement payment in June 2019, as compared to a $4.0 million settlement installment payment made to Bass Pro in January 2020. In addition, income tax payments decreased $14.1 million, spending on the acquisition and development of inventory decreased $15.8 million and the purchase of property and equipment decreased $10.0 million during the 2020 period as compared to the 2019 period. These increases in free cash flow were partially offset by lower cash sales and down payments from customers associated with the closure of VOI sales centers in response to the COVID-19 pandemic.

Special Dividend

On July 22, 2020, the Company declared a special cash dividend of $1.19 per share on its common stock, or $86.3 million in the aggregate, which is payable on August 21, 2020 to shareholders of record as of the close of trading on August 6, 2020. In connection with the special dividend, the Company obtained an undertaking by BBX Capital Corporation, which owns approximately 93% of the Company’s common stock, that it would use the proceeds of this special cash dividend to repay its outstanding $80.0 million note to the Company.

COVID-19 Response and Outlook

As of July 31, 2020, 23 VOI sales centers were open for existing owners, 17 of which were open for sales to new prospects. Further, as of July 31, 2020, the Company was marketing vacation packages at 85 Bass Pro and Cabela’s stores (out of the 89 that were open in March 2020) and had reactivated its call transfer marketing program with Choice Hotels. The Company currently anticipates that it will have reopened the remaining Bass Pro and Cabela’s locations by September 30, 2020. All of the Company’s 68 resorts were open as of July 31, 2020 and occupancy for July was approximately 68% at all resorts and 66% at resorts with on-site sales centers. However, increased COVID-19 cases in certain markets in July resulted in increased cancelation of marketing guest stays (and consequently, new owner prospects) and it is impossible to predict whether this trend will continue or worsen or the extent of the adverse impact this may have on the Company.

For further information regarding the Company’s COVID-19 Response and Outlook please see the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2020, which expected to be filed with the Securities and Exchange Commission on or about August 10, 2020.

Forward-Looking Statements

Certain statements in this press release are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, are forward-looking statements. Forward-looking statements are based on current expectations of management and can be identified by the use of words such as “believe”, “may”, “could”, “should”, “plans”, “anticipates”, “intends”, “estimates”, “expects”, and other words and phrases of similar impact. Forward-looking statements involve risks, uncertainties and other factors, many of which are beyond our control, that may cause actual results or performance to differ from those set forth or implied in the forward-looking statements. These risks and uncertainties include, without limitation, risks relating to public health issues, including in particular the COVID-19 pandemic and the effects of the pandemic, including resort closures, travel and business restrictions, volatility in the international and national economy and credit markets, worker absenteeism, quarantines and other health related restrictions; the length and severity of the COVID-19 pandemic and our ability to successfully resume full business operations thereafter; governmental and agency orders, mandates and guidance in response to the COVID-19 pandemic and the duration thereof, which is uncertain and will impact our ability to fully utilize resorts and re-open sales centers and other marketing activities; the pace of recovery following the COVID-19 pandemic; the risk that resorts and sales operations, including those at Bass Pro and Cabela’s store locations, may not reopen to the extent or when expected, or may be subject to additional closures in the future, particularly in locations where COVID-19 cases have increased; competitive conditions; our liquidity and the availability of capital; our ability to successfully implement our strategic plans and initiatives to navigate the COVID-19 pandemic; risks that default rates may increase and exceed the Company’s expectations, including due to the impact on consumers of the COVID-19 pandemic and if our efforts to address the actions of timeshare exit firms and the increase in default rates associated therewith are not successful; risks related to our indebtedness, including the potential for accelerated maturities and debt covenant violations; the risk of heightened litigation as a result of actions taken in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic on our operations and our payment of regular or special dividends in the future, including that despite the special cash dividend declared during July 2020, we have suspended the payment of regular quarterly cash dividends due to the impact of the COVID-19 pandemic, and dividends may not be paid at historical rates or at all; the impact of the COVID-19 pandemic on consumers, including their income, their level of discretionary spending both during and after the pandemic, and their views towards travel and the vacation ownership industries; the risk that our resort management fees and finance operations may not continue to generate recurring sources of cash during or following the pandemic to the extent anticipated or at all; risks that our current or future marketing alliances may not be available to us in the future; that the Company’s current strategy to reduce sales of fee-based inventory may not result in EBITDA growth or otherwise positively impact the Company and such strategy may change; our ability to successfully implement our strategic plans and initiatives, generate earnings and long-term growth; risks that the Company’s costs, including costs of VOIs sold, will not be within the expected ranges; risks related to our indebtedness; risks that natural disasters, including hurricanes, may result in declines in leisure travel or traffic at locations where we have marketing operations, adversely impact the availability of credit, or otherwise adversely impact the Company’s financial condition and operating results; any damage to physical assets or interruption of access to physical assets or operations resulting from public health issues, such as the COVID-19 outbreak, or from hurricanes, earthquakes, fires, floods, windstorms or other natural disasters, which may increase in frequency or severity due to climate change or other factors; and the additional risks and uncertainties described in Bluegreen’s filings with the Securities and Exchange Commission, including, without limitation, those described in the “Risk Factors” section of Bluegreen’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed on March 12, 2020, and the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2020, which is expected to be filed on or about August 10, 2020. Bluegreen cautions that the foregoing factors are not exclusive. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. Bluegreen does not undertake, and specifically disclaims any obligation, to update or supplement any forward-looking statements.

Non-GAAP Financial Measures

The Company refers to certain non-GAAP financial measures in this press release, including system-wide sales of VOIs, Adjusted EBITDA and free cash flow. Please see the supplemental tables and definitions attached herein for additional information and reconciliation of such non-GAAP financial measures.

About Bluegreen Vacations Corporation

Bluegreen Vacations Corporation (NYSE: BXG) is a leading vacation ownership company that markets and sells vacation ownership interests (VOIs) and manages resorts in popular leisure and urban destinations. The Bluegreen Vacation Club is a flexible, points-based, vacation ownership plan with approximately 219,000 owners, 68 Club and Club Associate Resorts and access to nearly 11,400 other hotels and resorts through partnerships and exchange networks as of June 30, 2020. Bluegreen Vacations also offers a portfolio of comprehensive, fee-based resort management, financial, and sales and marketing services, to or on behalf of third parties. Bluegreen is approximately 93% owned by BBX Capital Corporation (NYSE: BBX) (OTCQX: BBXTD), a diversified holding company. For further information, visit www.BluegreenVacations.com.

About BBX Capital Corporation

BBX Capital Corporation (NYSE: BBX) (OTCQX: BBXTD), is a Florida-based diversified holding company whose activities include its approximate 93% ownership interest in Bluegreen Vacations Corporation (NYSE: BXG) as well as its real estate and middle market divisions.

Contacts

Bluegreen Vacations Corporation

Investor Relations:

Leo Hinkley 954-940-5336

Email: [email protected]

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